2023 Tech Trends for the Asset Management Industry
BlackRock’s tech leaders share the trends affecting investors in the year ahead
By: Lance Braunstein, Head of the Aladdin Product Group, with input from tech leaders across BlackRock
Annual tech trend reports are a storied tradition at the start of each year. Firms across industries are eager to highlight exciting trends from Virtual Reality to the Internet of Things, to Autonomous Driving. All of these are cool and important, but I often come away with a sense that we’re missing our industry’s tech story and the trends that define our work at BlackRock.
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With that in mind, we surveyed some of the brightest minds in BlackRock’s engineering organization to pull together some thoughts on what’s shaping our 2023 technology agenda. We thought we’d share this list for the benefit of our clients, engineers, and the community of citizen developers across the firm that contribute to the Aladdin platform. We hope you find this list useful as we approach what is predicted to be another challenging year for the financial markets.
Cloud Native
Beyond moving existing technology stacks to the cloud, the ability to leverage the benefits of elasticity and dynamic compute relies on infrastructure and application investment that is collectively referred to as “cloud native.” For many asset managers and asset owners, who are going through a digital transformation, cloud native may still feel new or out of reach. In 2023, we’ll be keeping an eye on the clients and peers who continue to adapt many of the new tools and frameworks available to operate natively in the cloud, such as Kubernetes, which enables orchestration of infrastructure resources. At BlackRock, we’ve always taken a measured approach to adopting and testing technologies, and Aladdin is on the journey to being cloud native. At this point in our migration to the cloud, we’ve already realized many benefits, including allowing us to operate in locations where our clients need us and offer best in breed data center operations.
Generative Artificial Intelligence
There have been many advances in Generative AI (i.e., algorithms that can be used to generate new content) that excite us, and we are especially excited to see the widespread news coverage and adoption of ChatGPT, the latest AI tool that has captured many people’s imaginations. While it may be some time before ChatGPT is used for portfolio management, we’ll be observing how it evolves in 2023 and what new and innovative problems it helps solve, especially when it is trained on the right data sets. At BlackRock, we’re focused on AI/ML applications that will speed and scale how our clients manage portfolio risk or how it enables better modeling tools that are explainable and transparent and made for this new economic regime. As we enter an uncertain market environment, where our clients may need to run millions of different scenarios to identify vulnerabilities in their portfolios, we’ll be focused on how AI and ML will improve our suite of modeling tools. We will also continue to look for ways that enable our clients to contribute their own advanced models and analytics to the platform.
Blockchain & Digital Assets
With the all the recent negative news surrounding the crypto industry, it’s easy to lose sight of the blockchain technology that underlies crypto that is driving a new Web3.0 Internet era. Blockchain, in the simplest terms, is a distributed database — or you may hear the term “ledger” — that allows people in non-trust relationships to exchange data. We’re excited by the possibilities that blockchain enables in bringing about a more efficient, accessible, and inclusive financial system, and we will continue to take a long-term view of the digital assets space, aligning with our clients’ focus. Blockchain represents a core catalyst in the broad-based digitization of financial services. We believe its ultimate impact will be a more digitally native, more decentralized financial system that enables greater access to investment opportunities for our clients. We suspect the industry’s interest in blockchain will continue to increase through 2023.
Tech Debt
Tech debt accrues when an organization fails to maintain their technology dependencies. Tech debt is typically non-functional in nature and separate from commercial product features. It’s the company’s tech foundation for resilience, scale, supportability, performance, and security. As a result, technical debt can be less visible — that is, until it isn’t. When tech debt grows unchecked, it can limit an organization’s productivity, endanger strategic competitiveness, and increase exposure to operating threats. The biggest problem in tech debt stems from a lack of investment in tech infrastructure over time. It’s all too easy to underestimate how much effort is required to maintain healthy software and retain top talent to maintain complex systems. There are steps organizations can take to lower their tech debt including developing architectural patterns and agile processes to balance functional and non-functional investments, but even this requires consistent monitoring. As we approach 2023, institutional investors will need to consider their own tech debt when looking at buying or building their own technology.
Defense in Depth
The term originates from the military, and it’s used by The National Security Agency (NSA) to describe information security across the layers of the technology stack, from perimeter to network to applications. In our business, information security and platform stability are among our top organizational values, and a concept that we observe closely. Given the rise of information security incidents that have taken place in the industry, we’re continuing to monitor new techniques that strengthen our defense lines including how organizations implement “zero trust” between digitized assets, cryptography, and public/private key infrastructure (PKI).
Operational Resilience
With technology increasingly at the core of critical business operations, delivering predictable and stable service is paramount. Providing this level of reliable service requires not just excellence in engineering, but an ever-increasing focus on resiliency. As technology rapidly evolves, system complexity increases exponentially, dependencies and interconnectedness between multiple external critical service providers — including Cloud providers — accelerates. Resiliency is not simply stability in the absence of incidents, but rather the ability of a system to avoid or mitigate impact and recover from unforeseen disruptions in a highly interconnected technology ecosystem. Providing our clients with resilient technology products requires a combination of excellent engineering, a modern services architecture, self-healing solutions, and a rigorous use of observability for proactive detection. While AI offers some exciting prospects for improving detection and reaction, today resilient systems require a careful and well-rehearsed choreography between machine automation and human problem solving. Ultimately, resilience is the product of a relentless and persistent cross-functional focus on iterative improvement.
At BlackRock, our engineers work on real-world problems that have an impact on the end-investor and emphasizing a culture of social impact is key to our success.
Engineering Culture
The last item on the list is not necessarily about new tech, but we feel strongly that having the right culture is the key ingredient in driving the adoption of new technology for any organization. We wouldn’t be able to achieve continuous change for the last 30 years without a thriving and inclusive engineering culture. In fact, our ability to anticipate future tech trends hinges on our ability to foster a best-in-class engineering culture informed by the highest standards. In 2023 our clients will be faced with the challenge of doing more with less, which could mean introducing new technologies across their firms to drive efficiencies. At BlackRock, we aim to drive an engineering mindset and technical literacy across the firm by promoting initiatives like Citizen Development, a program that invites others at the firm to participate in code development for our platform with the appropriate controls. We see 2023 as a year to emphasize continuous learning, collaboration, and adaptability. We hear from our peers across the industry about the importance of building a culture that attracts, retains, and grows top technical talent. At BlackRock, our engineers work on real-world problems that have an impact on the end-investor and emphasizing a culture of social impact is key to our success.
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